SolvedCH82283 | Penalties for Inaccuracies: Calculating the penalty: Potential lost revenue Corporation Tax Group Relief or S458 CTA10: Example of Group Relief ignored for PLR
From HM Revenue & Customs · Compliance Handbook
You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.
A, B and C are a group of companies.
Their returned results are
| Company A profits | 50,000 | less Group Relief 50,000 | |
| Company B loss | (75,000) | ||
| Company C profits | 60,000 | less Group Relief 25,000 | |
| Aggregate profit | 35,000 |
Company A’s return is found to contain a careless inaccuracy which is put right to produce a true profit of £85,000. Company B can, and does, withdraw its surrenders of £50,000 to Company A and £25,000 to Company C and replaces them with a surrender of £75,000 to Company A. Company A amends its Group Relief claim to £75,000.
As the inaccuracy did not have the affect of creating or increasing an aggregate loss recorded for the group, Group Relief is ignored in calculating the PLR for Company A.
Assuming liability at the small companies’ rate, the additional tax due and payable as a result of putting right the inaccuracy is as follows.
| A Ltd | Correct | Original | Additional |
|---|---|---|---|
| Trading income | 85,000 | 50,000 | 35,000 |
| Less Group Relief | 75,000 | 50,000 | 25,000 |
| Profits chargeable to CT | 10,000 | 0 | 10,000 |
| Tax at small companies’ rate (say 21%) | 2,100 | 2,100 | |
| C Ltd | Correct | Original | Additional |
| Trading income | 60,000 | 60,000 | 0 |
| Less Group Relief | 0 | 25,000 | -25,000 |
| Profits chargeable to CT | 60,000 | 35,000 | 25,000 |
| Tax at small companies’ rate (say 21%) | 12,600 | 7,350 | 5,250 |
However the PLR for Company A’s penalty is calculated ignoring Group Relief
| A Ltd | Correct | Original | Additional |
|---|---|---|---|
| Trading income | 85,000 | 50,000 | 35,000 |
| Less Group Relief | 75,000 | 50,000 | 0 - (ignore 25,000) |
| Profits chargeable to CT | 10,000 | 0 | 35,000 |
| Tax at small companies’ rate (say 21%) | 2,100 | 7,350 | |
| C Ltd | Correct | Original | Additional |
| Trading income | 60,000 | 60,000 | 0 |
| Less Group Relief | 0 | 25,000 | 0 - (ignore 25,000) |
| Profits chargeable to CT | 60,000 | 35,000 | 0 |
| Tax at small companies’ rate (say 21%) | 12,600 | 7,350 | 0 |
Total PLR = 7,350 + 0 = 7,350